Guidance for those new to SMR & CR

On the back of the Parliamentary Commission on Banking Standard’s report prepared in the light of the financial crisis of the mid-2000s, in 2016 the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) implemented the Senior Managers & Certification Regimes (SM&CR) with the intention of sharpening the focus on individual accountability within the banking sector. One of the main features of SM&CR was the new set of Conduct Rules applied to nearly all employees of relevant firms.

Currently the Regime applies to banks, building societies, credit unions, designated investment firms and UK branches of foreign banks.

However, from 10 December 2018 the extension of the regime will mean that it applies to dual-regulated insurers and their managing agents,

The regime will be further extended to sole regulated FCA firms including asset managers, investment firms, consumer credit firms and claims management firms – soon to be regulated by the FCA – from 9 December 2019.

For those new to the regimes, here is some guidance:

1. KNOW WHICH RULES APPLY

Insurers, reinsurers and their managing agents will be subject to the FCA’s Certification regime, ‘Fit and Proper’ assessment obligations and Conduct Rules requirements. Solvency II insurers and insurers outside the scope of Solvency II who have assets over £25m are already subject to PRA SMR requirements.

2. IDENTIFY YOUR SENIOR MANAGERS (SMFS) AND CERTIFICATED INDIVIDUALS

The Senior Manger Regime focuses on individuals who hold key roles and responsibilities – the Senior Manager Functions (SMFs), whereas the Certification Regime (CR) focuses on roles where it’s possible significant harm could be caused to the firm or its customers.

Regulators need to approve SMFs individually, as they do currently with controlled functions. Each SMF will have a Statement of Responsibility that details their prescribed and other responsibilities (similar to the Scope of Responsibilities which some insurers used under the revised Approved Persons Regime (APER)).

Unicorn’s Learning Management System (LMS) has powerful SMR and CR tools to assist you with this task. Easy allocation of the functions and responsibilities can be achieved in just a few clicks with a full audit tracking facility.

All those allocated a SMF must sign their statement of responsibility as a declaration that they agree with those responsibilities allocated to them.

Both SMFs and Certificated individuals need to be assessed re: their fitness and propriety on an annual basis. If individuals cannot be signed off as fit and proper they cannot perform their role without direct supervision.

Unicorn’s SMR and CR tools can also assist you with this task. Auto generation of a declaration can be sent to those that need to review and accept. You can also automatically assign fit and proper assessments to be completed by individuals online, which can then be sent to managers for sign off through a workflow.

4. UNDERSTANDING WHO NEEDS TO BE TRAINED

It is not just your SMFs and Certificated staff that need to understand the impact of the regime. Most staff with in your firm will also need to undertake training in the Conduct Rules too. Unicorn’s ‘General Risk and Compliance’ content can be a great aid in assisting your firm with this task.

We have ‘Off the Shelf’ content in both the Senior Manager and Certificate Regimes as well as the Conduct Rules covering all firms by function and job family role.

5. MANAGEMENT RESPONSIBILITIES MAP (RM)

Apart from Core and Limited Scope firms in the extended SMCR, firms must produce and submit a RM. Unicorn’s LMS’s SMR and CR tools will again seamlessly assist you with this task with easy editing, shared and interim responsibilities allocation plus full audit and tracking functionality.